Which risk category refers to the inherent variability in operating results, including the possibility of gains?

• A. Takeover
• B. Common name statute
• C. Business risk
• D. Tender offer

Answer: (C)

The main idea here is business risk, which covers the inherent variability in a company’s operating results arising from how the business actually performs. Things like changes in sales demand, price competition, input costs, productivity, and other day-to-day operating factors can cause earnings to swing up or down. Because these factors can move in favorable as well as unfavorable directions, gains are possible alongside losses, which is why this category fits best.

The other options aren’t risk categories tied to how a business operates: takeovers and tender offers are corporate actions that can affect value but aren’t risk categories; a common name statute is a legal doctrine, not a risk classification.